Entrepreneurs should keep their eyes on three issues making
headlines in Washington.

Congress is expected to pass a bill that gives new flexibility
to Small Business Investment Companies (SBICs), which combine their
funds with federally backed loans to make investments in and loans
to small businesses.

The bill (H.R. 68) makes several changes to the current law. The
House approved H.R. 68 on February 2, and the Senate will probably
have passed it by the time you read this.

Two provisions are worth highlighting. Currently, SBICs that
agree to buy stock in a small business can't fork over the
capital until the fourth quarter of their fiscal year, which is
when they receive 50 percent of their funds--known as
leverage--from the SBA. H.R. 68 allows the SBA to distribute
leverage evenly throughout the year so small businesses can receive
the SBIC investment more promptly. A second provision lets an SBIC
reduce the interest rate on a loan made to a company in exchange
for stock options in that company.

Another small-business bill may encounter some difficulties.
Sen. Christopher Bond (R-MO) introduced a bill (S.344) aimed at
forcing the IRS to be more reasonable in how it defines independent
contractors. The bill sets up two alternatives to the IRS'
current 20-factor test, which makes it difficult to legally claim a
contractor is independent (and not an employee). Either of the
proposed alternatives could be used to prove that someone is an
independent contractor.

Regarding the SBA reauthorization bill that passed in 1997, the
SBA is currently writing rules to define the bill's
anti-contract-bundling language. The proposed rules would be used
by the Defense Department, NASA and other big-project agencies to
determine when and to what extent they must break up big contracts
so small businesses can have a chance to win all or part of them
during competitive bidding. The rules will also dictate when the
SBA can protest new contract awards where small-business bidders
have been unfairly ignored.

Felix Martinez of the American Consulting Engineers Council was
a staffer on the House Small Business Committee during hearings on
the SBA reauthorization. He says much of what's in the proposed
rules is positive, but is concerned the SBA will use the rules to
break up large contracts that were consolidated years ago with the
intention of including small businesses. "They need to pick
and choose their fights," he says. "They should go after
contracts that are being unfairly bundled for the first time right
now."

Stephen Barlas is a freelance business reporter who covers
the Washington beat for 15 magazines.

Heard On The Street

By Debra Phillips

Not so entertaining after all? Recent moves to revamp the
Planet Hollywood restaurant chain underscore the public's
apparently diminishing appetite for theme restaurants in general.
Sure, the classic Hard Rock Cafe looks to be rockin'
'n' rollin' for many years to come--but upstart
eatertainments like Rainforest Cafe and Fashion Cafe may
prove to be merely flashes in the pan.

Make-believe it or not: It seems an eating establishment in
Israel actually specializes in serving nothing--literally. In a
move that would surely please Jerry Seinfeld, architect of the most
famous TV show in history about nothing, Cafe Make Believe offers
up empty plates to patrons. Presumably, diners get their fill by
being hip.

Money makes the world go 'round, right? Well, maybe not.
According to a recent Gallup study, some 70 percent of employees
surveyed favor nonmonetary recognition over cold, hard cash. The
study, commissioned by the Carlson Marketing Group, also revealed
that employees prefer private commendations instead of public
praises. More than 80 percent say kudos for a job well done
inspires them to do even better.